Agricultural credit under volatile macroeconomic conditions : perspectives of Zimbabwean stakeholders.
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According to the World Development Report 2008, if the world is committed to reducing poverty and achieving sustainable growth, it would unleash the powers of agriculture because the majority of the world’s poor depend on agriculture for their livelihood. The financial sector can play an important role in supporting agriculture through the extension of agricultural credit. Literature shows that this can only be successfully achieved when financial institutions operate under stable macroeconomic conditions. This study explores the experience of giving agricultural credit under volatile macroeconomic conditions. It focuses on a case study of Zimbabwe, whose hyperinflationary levels reached over 3 000% in 2007 and a monthly rate of 79,6 billion percent in mid-November 2008. Findings from interviews with informants from stakeholder institutions in the agricultural sector revealed that the problem of agricultural credit in Zimbabwe was not only due to hyperinflation but also due to poor institutional capacity and dual agricultural policies. Some of these problems existed before hyperinflation. The paper argues that the future of agricultural credit in Zimbabwe is anchored on three pillars. The first is a stable macroeconomic environment. This involves bringing down hyperinflation, establishing land tenure security and other rights and improving rural infrastructure. The second is development of financial institutions and systems (building institutional capacity, building a culture of loan repayment and capitalisation through private partnership). Finally, the third is necessary political will.